TuSimple, as soon as a buzzy startup thought-about a pacesetter in self-driving vehicles, is making an attempt to maneuver its belongings to China to fund a brand new AI-generated animation and online game enterprise. The pivot has not solely puzzled and enraged a number of shareholders, but additionally threatens to tug the corporate again right into a authorized morass mere weeks after reaching a preliminary settlement in a category motion lawsuit.
Now, a battle is brewing over roughly $450 million in funds, the majority of which stays in the USA, TechCrunch has realized. And arguments over the corporate’s mission lie on the heart of it.
Earlier than the corporate formally disclosed its new enterprise phase in August, a bunch of shareholders who received wind of the change despatched a letter to the corporate’s board of administrators. The letter, considered by TechCrunch, alleges “potentially fraudulent activities” and asks the board to research whether or not funds had been being misappropriated “to facilitate the growth of private ventures” established by Mo Chen, TuSimple’s co-founder and chairman.
Shareholders additionally complained the corporate did not disclose its pursuit of AI animation; the board would ultimately publicly announce a brand new AI animation and gaming enterprise.
The group, which despatched the letter anonymously in July, threatened litigation. Nonetheless, on the time of this writing, no fits have been filed but.
TuSimple’s new enterprise phase, which is growing an animated characteristic movie and online game based mostly on the science fiction collection The Three Physique Downside, is a startling change from its origins.
The China-backed startup, based in 2015 by Chen and Xiaodi Hou, was as soon as a darling within the autonomous car trade. TuSimple, which was headquartered in San Diego and had operations in Tucson, raised $648 million in enterprise cash from Chinese language VCs and mega firms reminiscent of Sina Corp., in addition to high-profile U.S. companies like Nvidia, Goodyear and UPS. It had key partnerships with Navistar and Ryder. The corporate’s IPO in 2021, by which it raised one other $1.35 billion at a post-money valuation of $8.49 billion, was meant to speed up its drive in direction of a industrial self-driving vehicles enterprise.
TuSimple appeared unstoppable. However its plans had been quickly derailed by inside drama, restructuring, a misplaced partnership with Navistar, a self-driving truck crash, and federal investigations into the corporate’s ties with China.
TuSimple’s inventory worth plummeted consequently, falling from a excessive of $62.58 to underneath $1 a share earlier than it voluntarily delisted in January 2024. At this time, it’s buying and selling over-the-counter at round $0.19 per share. TuSimple’s struggles prompted the corporate to take inventory of its operations and in the end exit the U.S. The corporate has stored its Asia-Pacific subsidiary, generally known as TuSimple China.
Tied up funds and distrust
TuSimple China is relying on accessing the money that it has left. International TuSimple CEO Cheng Lu instructed TechCrunch the corporate has about $450 million in money.
And TuSimple continues to plow by way of capital. The Chinese language subsidiary’s annual working bills exceed $100 million, or about $8 million a month, in accordance with a declaration by Lu in a court docket submitting from January 2024.
At this time, the majority of the $450 million that is still in U.S. accounts is basically inaccessible as a consequence of three lawsuits, together with a shareholder class motion the corporate is near settling for $189 million. A momentary restraining order issued by a California district court docket in January remains to be in impact, blocking TuSimple from transferring belongings outdoors of the U.S. apart from transfers which might be in the midst of the corporate’s enterprise.
TuSimple has argued it ought to have full entry to these funds. The corporate must switch cash freely to China with a purpose to “commercialize autonomous driving technology” there, Lu stated in a June 2024 declaration despatched to the U.S. District Court docket of the Southern District of California.
“TuSimple China will be the principal operating asset of TuSimple and, for the foreseeable future, the sole means by which TuSimple’s shareholders — including many U.S. investors — may benefit from the commercialization of TuSimple’s autonomous driving technology,” Lu stated within the June court docket submitting.
The declaration says nothing about animation and gaming. When requested about this, Lu stated animation and gaming fall underneath the scope of commercializing autonomous driving expertise.
“The words are ‘commercializing the technology,’ and we’re trying to commercialize technology,” Lu stated. “If you commercialize, that means you make money off the technology, and we’re trying to make money off it, plain and simple.”
In letters to the TuSimple board and conversations with TechCrunch, involved shareholders say they’ve little religion in administration to generate worth for them, and that the delisting and U.S. shutdown ought to have been a possibility for the corporate to liquidate and redistribute wealth again to them.
“The company’s autonomous trucking operations appear to still be in the development state at best despite running over $1.8 billion in accumulated losses,” wrote Camac Companions, an investor with a 5.6% stake in TuSimple, in a letter to the board on Could 30. He urged the board to maintain TuSimple’s funds within the U.S. to guard the corporate belongings for the advantage of all shareholders.
If the dispute turns into one other lawsuit, TuSimple might be additional delayed from transferring funds again to China. However the clock is ticking. TuSimple filed on the finish of August to deregister with the SEC. Whereas TuSimple has been delisted for 9 months, the corporate remains to be registered with the SEC, which implies it stays underneath U.S. scrutiny. As soon as the cash goes to China, shareholders within the U.S. can have no recourse to claw again funds from their unique funding.
The worldwide wrestling match over TuSimple’s belongings comes as overseas direct funding into China has seen 12-month lows, and Chinese language VCs with U.S. cash have left the nation amid geopolitical tensions. Chinese language companies are in search of inventive methods to draw outdoors capital.
Rolling again AVs, scaling up animation
As TuSimple pushed for these U.S.-based funds, its AV operations in China had been in flux.
TuSimple China had in late 2023 begun beefing up its autonomous driving group in anticipation of shutting down U.S. operations, a number of sources instructed TechCrunch.
It was that ramp up that made what occurred in early 2024 so surprising.
In late January, roughly 10 days earlier than the Chinese language New 12 months the next month, TuSimple introduced a compulsory “long holiday” for workers, in accordance with the accounts of a number of former staff who spoke to TechCrunch on situation of anonymity. That lengthy vacation successfully was a layoff that affected a whole lot of employees within the firm’s core autonomous car enterprise, in accordance with a number of former staff. TuSimple instructed staff that in the event that they voluntarily left the corporate, they’d obtain severance. Sources say the details about severance was communicated verbally throughout an all-hands, so there was no written discover.
Sources additionally inform TechCrunch that TuSimple China’s headcount dropped from 700 to 170, however that some staff had been employed again for the animation program.
Lu has denied that TuSimple laid off employees. In an interview with TechCrunch, Lu stated round 500 staff, together with chief expertise officer Naiyan Wang and different core tech staff, resigned en masse and of their very own accord between February and Could.
Lu didn’t present a purpose, however famous that the momentary restraining order, issued in January, brought about TuSimple to lose strategic autonomous trucking partnerships in China. Lu didn’t verify the character of these partnerships, however in a January court docket submitting, the manager stated TuSimple China’s budding partnership with the Port of Shanghai to check self-driving expertise was in danger if the momentary restraining order blocked the corporate from sharing proprietary knowledge with the port’s fleet administration system. Lu’s declaration additionally famous the momentary restraining order threatened two contracts to license the corporate’s superior driver help expertise to truck producers in China, in addition to TuSimple’s ongoing collaboration with Nvidia.
Lu confirmed to TechCrunch that TuSimple is now not working self-driving operations within the nation, though he added the corporate remains to be actively in search of strategic companions to assist the corporate develop self-driving tech.
In the meantime, TuSimple spent a lot of 2024 licensing leisure IP and staffing up its new animation and gaming enterprise phase, in accordance with public job listings and interviews with former staff. Lu instructed TechCrunch that as we speak there are round 250 staff at TuSimple China — all of whom work on each self-driving and animation and gaming.
All through June, July, and August, TuSimple China posted new job listings seeking employees with expertise in online game improvement and animation. The roles included titles like video editor, movie director/screenwriter, sport writer, generative AI-focused backend engineer and anchor for reside broadcasting, in accordance with public postings. One description mentions TuSimple is engaged on a venture associated to martial arts and that the corporate owns “multiple Chinese top IP.”
There are additionally job postings that would ostensibly be for self-driving, reminiscent of a crawler engineer, company improvement and technique affiliate, and controller for the finance group.
Regardless of protests from some shareholders, TuSimple has defended its actions, arguing that each a nationwide safety settlement in 2022 with the Committee on Overseas Investments in the USA and momentary restraining orders from California courts have made it subsequent to unattainable to run self-driving operations in China. One momentary restraining order was lifted July 31; the opposite stays in place.
Lu argued the pivot to animation and gaming, a fast-growing $600 billion trade, was a logical use of the corporate’s self-driving expertise infrastructure and AI, one that would present TuSimple with near-term earnings.
“We’re taking that know-how and the technology, and we’re going to generative AI by developing high quality content, video games, and animation faster using AI that in the near term we believe can generate a significant amount of return for our shareholders,” Lu stated.
Animation and gaming additionally occurs to be of non-public curiosity to Chen, in accordance with a number of traders, former staff, and Lu.
Chen has been a central determine all through TuSimple’s nine-year historical past that extends past his co-founding standing. His connections helped the corporate land a essential funding in 2021 from Sina Corp., which runs China’s largest social media platform Sina Weibo. Charles Chao and Bonnie Yi Zhang, respectively the CEO and CFO of Weibo, had been each members of TuSimple’s board. Solar Dream, an affiliate of Sina, was TuSimple’s largest shareholder for a time, though that funding did result in an investigation by the Committee on Overseas Funding in the USA.
Chen additionally has a private reference to Yunli Liu, who was Sina’s head of funding and backed the founder’s internet gaming firm, Beijing Blue Brothers, which Sina later acquired. Sina additionally controls the IP of the Three Physique Downside.
Chen’s intertwined enterprise pursuits have at occasions raised the ire of shareholders and caught the eye of U.S. regulators as nicely.
Of their July letter to the board, the group of shareholders alleged Chen may be personally benefiting from TuSimple’s transfer to animation and gaming. They pointed to 4 personal animation and gaming companies which might be related to Chen and his different companies, TuSimple and Hydron, a Chinese language startup launched in March 2021 to construct autonomous-ready hydrogen vehicles.
One among companies, Beijing BearBear Nation Cultural Media Co., based in November 2020, lists Chen because the CEO and authorized consultant. A TuSimple e mail handle was used as the corporate’s registered contact in 2020 and 2021. One other, Shanghai Xia Dao Cultural Communication Co., had the identical bodily handle as TuSimple Beijing when it was based in December 2023. Its handle as we speak is similar as Hydron’s in Shanghai. The corporate’s CEO Cheng Zhang and head of finance Xiaoning Tian additionally overlap with TuSimple and Hydron.
The overlap between Hydron and TuSimple, each owned by Chen, has additionally been the topic of investigation. In 2022, after a Committee on Overseas Funding in the USA probe, TuSimple revealed that its staff spent paid hours working for Hydron in 2021, and that confidential data was shared with the corporate. After reaching a nationwide safety settlement that may hold TuSimple’s autonomous driving knowledge, expertise, and R&D within the U.S., the board voted to oust certainly one of its co-founders. However not the one with direct ties to Hydron. As an alternative, the board fired its CEO, Xiaodi Hou, who claimed the elimination was achieved with out trigger.
The following inventory fall and lack of disclosure round Chen’s relationship with Hydron resulted in a category motion lawsuit from shareholders in November 2022 that’s nonetheless open as we speak.
The involved shareholders within the July board letter additionally known as consideration to 2 new subsidiaries TuSimple shaped in Could 2024, each of which fall underneath the “cultural and art industry” class. They stated that TuSimple’s lack of disclosure across the new subsidiaries, coupled with Chen’s different enterprise connections may be proof of alleged impropriety.
TuSimple did find yourself disclosing its pivot to AI animation and gaming on August 14, two weeks after the shareholder letter was despatched.
Lu confirmed the existence of the subsidiaries to TechCrunch and refuted the concept TuSimple wanted to reveal a possible enterprise avenue with shareholders earlier than it was materially essential. He pointed to Apple’s Mission Titan automobile venture, which the corporate additionally by no means divulged to shareholders publicly, and famous that TuSimple really began growing laptop imaginative and prescient for promoting in 2015.
“Companies internally look at new opportunities all the time,” Lu stated.
